Velina Niña April 27, 2023

BSBA 2-D Prof. Rene Antiporda

Explain the following:

1. Differentiate the internal users from external users of financial statements.

 Internal users refer to those people or group of people who are inside the business organization
such as owner/s, accountants, managers, and auditors while external users are those people or
group of people who are outside of the business organization. They include potential investors,
creditors, government, and research scholars.

2. Compare financial accounting from managerial accounting.

 The primary goal of managerial accounting is to develop relevant information for a company's
internal usage, which includes special purpose financial statements and a detailed report. While
in financial accounting, has certain internal applications as well, but it is far more concerned
with educating those external users, which generates general purpose financial statements and
contains precise information. In summary, financial accounting is made for a company's
investors, creditors, and industry authorities, whereas managerial accounting is created for its
management.

3. How do the objectives of management accounting contribute to the success of business operations?

 The goals of management accounting is to genuinely help businesses succeed in their operations
by assisting managers in making decisions that will improve the efficiency of their operations.
The first of these goals is performance measurement, which is the evaluation of how well
officials and workers carry out their individual duties and obligations in order to contribute to
the overall operational effectiveness of the organization. The company should be operating
under a controlled risk; otherwise, too much risk exposure could result in a negative profit
and/or business failure. The second is risk measurement, which is the risk that the business
enterprise allowed in order to be efficient in carrying out its day-to-day operations. The
appropriate allocation is third.

4. Evaluate the limitations of management accounting in reducing risk of business failures.

 The weakness of managerial decisions are historical data since management accounting relies
on financial accounting, as we already discussed in our discussion of the limitations of
management accounting. In reality, the methods and tools employed in commercial decision-
making are really extra. The financial data is also restricted to decision-makers only. A decision-
maker in management accounting should rely on his own experience. Decision-makers must
exercise extreme caution since decisions they make are based on their own personal analyses.